IT and the Global Labor
Market
Jonathan Harris
21*.034
1
Investigation
• Role and value of IT in global economy
– Service sector
– Manufacturing
• Is this value responsible for outsourcing?
2
Outline
• Value of IT in U.S. economy
– Service sector
– Manufacturing
• Value of IT in developing countries
• Discussion of outsourcing
3
Looking Back: Mid 90s
• IT is important to growth, but in context of
a broader set of managerial decisions
• Productive IT applications had 3
characteristics
– Tailored by sector and linked to performance
levers
– Built capabilities over time
– Co-evolved with managerial innovation
4
Narrowly Tailored
• Eight performance levers
–
–
–
–
–
–
–
–
Substituting capital for labor
Deploying labor more efficiently
Reducing non-labor costs
Increasing labor efficiency
Increasing asset utilization
Selling new value added goods
Shifting to higher value added goods
Realizing more value from existing goods
5
Service Sector
• Retail
– Examples
• Warehouse and transportation management
systems
– Reduced nonlabor costs
– Substitution of capital for labor
– Realized more value from existing goods
– Increased labor efficiency
6
Service Sector
• Banking
– Examples
• Credit scoring and underwriting software
• Check imaging
• Voice Response Units (VRUs)
– Levers
• Substituting capital for labor
• Deploying labor more efficiently
• Increasing asset utilization
7
Manufacturing
• Semiconductors
– Examples
• Electronic design automation
• Process control systems
• Process diagnostic tools
– Levers
• Selling of new value added goods
• Increased labor efficiency
• Increased asset utilization
8
Manufacturing
• Valve making
– Computer numerically controlled (CNC)
machines
• Programmed by software
• Leads to reduction in number of machines
– Flexible manufacturing systems
• Coordinates multiple CNC machines
• Speeds up run time
9
Manufacturing (cont)
• Thus, competitive strategy of IT enabled
U.S. firms has changed to producing
customized products
10
Global Implications
• Outsourced services and goods
– IT offers little comparative advantage
– Domestic demand for IT has dropped
– Comparative advantage in labor
• Demand still exists for specialized, expert
services
11
Global Implications
• Same is true of manufacturing
– US firms produce more specialized goods
– Developing nations producing more batch
commodities
12
Conclusion?
• Given 3.4 million IT jobs are projected to
go offshore by 2015, how will we bridge
digital divide here in US?
• How will we distribute those jobs among
developing nations?
13
MIT OpenCourseWare
http://ocw.mit.edu
21G.034 / CMS.930 Media Education and the Marketplace
Fall 2005
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